Navigating property taxes in Arizona can seem like a daunting task. Understanding how local governments collect taxes, what deductions are offered, and how to benefit from tax incentives are key to ensuring you’re getting the best return on your investment.
Whether you’re a homeowner, a landlord, or a commercial property owner, it’s important to understand the basics of Arizona property taxes. Not only will this knowledge help you properly budget for the future, but you may even be able to deduct state, local, and federal taxes from your returns.
In this comprehensive guide, we’ll cover everything you need to know about navigating property taxes in Arizona, including explanations of tax incentives, how to calculate property tax, and filing deadlines.
Understanding Property Tax Rates in Arizona
If you’re a resident or investor in the Arizona real estate market, understanding property taxes is essential. Every county in Arizona has their own assessment and collection practices that dictate the amount of revenue generated for the local governing body.
Property taxes are based on a combination of millage (or mill) rates as well as the assessed value of the property. The mill rate is the ratio used to calculate the amount of taxes payable, and is expressed as so many “mills” or “thousandths” of a dollar per $1 of assessed value.
Deductions in Arizona Property Tax Payments
The amount of taxes due on a property is reduced by the eligible value of certain deductions, such as exemptions and credits. These deductions are specific to Arizona, and some exemptions apply exclusively to homeowners or a particular type of real estate.
The Residential Tax Credit is one example of an exemption for Arizona homeowners. This exemption helps to reduce property tax, but is only allowed for any excess over the regular assessment. In other words, it applies only after other deductions such as the Homeowner’s Exemption have been applied.
Investors may also be eligible for deductions, such as the Renovated Property Deduction for a building that’s been repurposed and is being used as a rental property, or the Multi-Family Property Deduction, which applies to any residential or commercial rental property.
Calculating Taxes in Arizona
Calculating property taxes in Arizona is a bit more involved than simply multiplying the mill rate by the assessed value. As mentioned, there are a number of deductions that can be taken into consideration before the amount of taxes due is finally determined.
When calculating Arizona property taxes, it is important to understand the assessed value of the property. This is the value the state’s Assessors Office has assigned to the property, which is then multiplied by the mill rate, and then adjusted with any applicable deductions.
Finally, the amount of taxes due is divided by 12, since taxes are usually paid in 12 equal installments. After all the calculations are completed, you will have a final amount of taxes to pay.
Tax Obligations and Deadlines
- Property taxes must be paid by March 1st
- Taxes are usually due annually, but can be paid in two or four installments throughout the year
- Failure to pay taxes can result in a lien being placed on the property or in foreclosure proceedings being initiated
- Property owners must have the appropriate records available, including their most recent tax assessment, in case of any disputes with the Assessor’s Office
Conclusion
Navigating property taxes in Arizona can be a complicated process, but understanding the basics is key to ensuring you’re in compliance and getting the best return on your investment. Whether you’re a homeowner, landlord, or commercial property owner, understanding the millage rates, deductions, and deadlines is essential.